Tech stocks are having a moment. Again. The Nasdaq’s hitting fresh highs, and everyone’s suddenly convinced that now—*right now*—is the time to go all-in on the AI mega-cap gang. But here’s the thing: Manish Kabra, the Chief US Equity Strategist at Société Générale, is basically saying “pump the brakes, friend.” And he’s got receipts.
Look, the AI scare earlier this year tanked tech valuations to genuinely cheap levels. That prompted the usual suspects on Wall Street to dust off their “buy the dip” playbooks. Fair enough—the sector’s up 18% since late March. But Kabra’s watching two specific metrics that suggest we’re not quite at the “go big” moment yet.
**The Free Cash Flow Problem**
Here’s the deal: Amazon, Google, Meta, Microsoft, and the rest of the hyperscaler crew have been absolutely hemorrhaging cash into AI infrastructure for the past couple years. We’re talking data centers, GPUs, the whole nine yards. Their collective free cash flow has been declining every quarter since early 2024. Kabra thinks it’ll actually go *negative* by year-end before bouncing back into positive territory in early 2027.
Why does this matter? Free cash flow is basically the financial equivalent of a clean bill of health. It tells you a company’s actually making money after paying for all its stuff. When it’s strong, investors get excited. When it’s tanking? That’s a red flag, even if the stock price is doing backflips.
“I don’t see that inflection happening in 2026,” Kabra said. Translation: patience is a virtue.
**The Capex-to-Sales Ratio Reality Check**
Then there’s the spending spree itself. Meta, Amazon, Google, and Microsoft are expected to drop around $600 billion on AI this year—nearly *double* what they spent in 2025. That’s not a typo. That’s a lot of money betting on a future that hasn’t fully materialized yet.
Investors got antsy last year watching these companies throw billions at AI without seeing concrete returns. Kabra gets it. He wants to see actual monetization before he’s ready to overweight the sector. And he thinks that signal will come in Q1 2027.
**The Bottom Line**
So what does this mean for your portfolio? Kabra thinks the S&P 500 will struggle to break above 7,000 this year, partly because tech makes up about 32% of the index. But here’s his play: the equal-weighted S&P 500 is looking better right now. It’s heavier on materials, industrials, and utilities—sectors that should keep benefiting from America’s insatiable appetite for power.
The takeaway? Tech stocks aren’t going anywhere. But the best entry point might not be today. Sometimes the smartest move is knowing when to sit tight and wait for the fundamentals to catch up with the hype. Kabra’s basically saying: the tape will be “very, very bullish” on tech once free cash flow turns positive. Until then? There’s no shame in waiting for a better setup.
